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Finance and Tax

Both the Senate and House have agreed upon reducing Motor Vehicle License Fees by approximately $395 million. As a part of the budget process both chambers will propose and adopt other tax cuts and economic development incentives that will be negotiated during the budget conference to determine a final package.

Status: The House tax package was work shopped by the Senate and then considered by the full Senate Appropriations committee. The bill was significantly amended by removing the entire house proposed tax cuts and economic development incentives. The Senate committee then inserted the Senate recommended tax cut and economic development package. Of the major revisions, the proposed PECO Tax Swap was removed in its entirety and the contents of SB 266, regarding a cut to the State CST, was inserted. After revisions were adopted, the bill was temporarily postponed for further discussion at a later date.

Senate Amended Tax Cut or Economic Development Concept

Local Government Statewide Impact

Non-Recurring (1 Year)

Recurring (Ongoing)

Sales Tax Holidays

3 – Day Back to School Sales Tax Holiday

($7,200,000)

Reduction of tax rate on State CST and Satellite Services

reduces the communications services tax (CST) rates by 0.xx percent, reducing the general rate from 6.65 percent to 6.xx percent and the rate on direct-to-home satellite from 10.8 percent to 10.xx percent.

($8,400,000)

Private Label Credit Cards

Provides for refund of sales taxes originally remitted for accounts that are “charged off”

($1,000,000)

Prepaid Calling

Modernizes the definition of "prepaid calling arrangement" (Broadens exemption from state and local CST taxes)

Summary: (After 3/19/2014 Amendment) SB 266 reduces the communications services tax (CST) rates by 0.58 percent, reducing the general rate from 6.65 percent to 6.07 percent and the rate on direct-to-home satellite from 10.8 percent to 10.22 percent. The bill also makes conforming changes to the statutes that authorize a communications services dealer to collect one combined rate that includes both the CST and the gross receipts tax to reflect this two percent reduction in the communications services tax. The effective date of the bill would be January 1, 2015

Fiscal Impact: Approximately $5.9 million annually

Status: SB 266 was incorporated into the Senate proposed tax cut and economic development package that was amended onto the House Tax Cut bill (HB 5601). The House is not considering a major CST related tax cut.

Summary: SB 176 reduces the sales and use tax rate on commercial leases by 1 cent from the current state rate of 6% to 5%. The effective date of the bill would be January 1, 2015.

Fiscal Impact: Approximately $17.2 million annually

HB 11 phases in an incremental repeal of the sales and use tax rate on commercial leases by 1 cent per year, including local options taxes levied by local governments over a six year period. The effective date of the bill would be July 1, 2014.

Fiscal Impact:$400 million annually after the full repeal

Status: SB 176 has been referenced to four committees with no hearing yet. HB 11 referred to three committees with no hearing yet.

Summary: Among a variety of technical updates to current law the major emphasis of the legislation is to provide a mechanism for collection of the E911 fee on prepaid wireless services by retailers at the point of sale. In conjunction with applying the fee to prepaid wireless services the actual fee is being proposed at a reduced rate equal to creating a revenue neutral impact on the total amount of revenue currently collected.

Fiscal Impact: It has been determined that a reduction in the fee from 50 cents to 40 cents is necessary to keep the legislation in a revenue neutral posture due to the expanded base including prepaid telecommunications.

Status: HB 175 was approved unanimously by the entire House membership on 3/27/2014 and will now await senate action. SB 294 has passed two of three committee references.

Summary: (After 3-19-2014 Senate Amendment) The senate version of the legislation authorizes counties to use proceeds & interest of local government infrastructure surtax for maintenance and operation of infrastructure only after the approval of an ordinance adopted via a countywide referendum. The house version of the legislation authorizes counties to use proceeds & interest of local government infrastructure surtax for maintenance and operation of transportation infrastructure only after the approval of an ordinance adopted via a countywide referendum. The Senate version also authorizes counties to levy discretionary sales surtax for homeless services & facilities pursuant to ordinance conditioned to take effect upon approval of referendum. The proposed local option for homelessness services would be included underneath the existing cap on combined local discretionary surtaxes levied by counties.

Fiscal Impact: The revenue estimating conference has yet to provide an analysis

Status: HB 723 was approved by the House Finance and Tax Committee on 3/26/2014 and now moves to the House Local and Federal Committee, which is its second of three references. SB 786 has passed two of four committees of reference.

Summary: Both bills provide technical revisions to the existing incentive programs and provides for appropriation to fund the program over several years. Currently, the House bill provides funding in the amount of $200 million per year for six years. The Senate bill provides funding in the amount of $50 million per year for six years.

Status: HB 983 has three committees of reference. SB 1640 passed out of its first committee of reference and is scheduled next to be heard in Finance and Tax.

SB 1734 (Sen. Detert)

Summary: This bill is similar S 1640 with the major exception that applicants receiving film or entertainment tax credits must receive a 10 percent cash match from the county in which the major production will take place.

Status: SB 1734 was passed by the Senate Commerce and Tourism committee on Monday 4-7-2014, and is awaiting the assignment of further committee references.